Winning the Real World Cup

7/2/2014

Here in the United States, we think our Super Bowl is the biggest sporting event around. Every four years, though, we're reminded that there are nearly seven billion other people on earth — and when it comes to sports, well, their version of futbol is even more popular than ours. This year's Super Bowl reached a record 111.5 million viewers, making it the most-watched event in U.S. history. That sounds impressive — but it pales next to the 3.2 billion who are expected to watch soccer's World Cup.

Of course, some things remain the same no matter how large a stage they occupy. Cities are willing to spend millions to host football's big game. And countries are willing to spend billions to host soccer's big event. Brazil has dropped $3.6 billion just to build and renovate stadiums for the games, including $300 million for the Arena Amazonia which will host only four games. And they've spent another $8 billion or so on infrastructure to support the games, like highways and airports.

As you can imagine, those direct expenses aren't the only costs associated with the game. That's because even the tax man has to stand for his share of penalty kicks! The Fédération Internationale de Football Association, or FIFA, requires host countries to grant all-encompassing tax exemptions to "FIFA's service suppliers established in Brazil" and "non-resident individuals hired or engaged to work in the events." This means no individual or corporate income taxes, no value-added or sales taxes, no excise taxes, and no other kind of taxes that local law might impose. Those tax breaks add to the host country's total burden by taking away revenue they might otherwise capture. And they extend even to international corporate sponsors like McDonald's and Anheuser-Busch InBev, maker of Budweiser. (What's the connection to soccer? Well, McDonald's has rolled out new French fry packaging with bold artwork celebrating the Cup. And there just might be a fan or two hoisting a Budweiser during the games.)

Now, some opponents of all that spending are calling foul on all that hype and cost. One antipoverty group estimates Brazil will give up as much as $569 million in revenue that could have been used to lift 37 million Brazilians out of poverty and improve basic services. "The price of these tax breaks for corporate giants will be paid by people living in poverty in Brazil and that is obscene," said Isabel Ortigosa of the Spanish group InspirAction. Her group is calling on FIFA President Sep Blatter to "give tax breaks for the World Cup sponsors the red card — and never impose these rules on World Cup host countries in the future."

Defenders reply that the goaltenders in Brazil's Federal Revenue Service will actually come out ahead with the Cup. Rabid soccer fans from across the globe are dropping billions in restaurants, bars, and hotels surrounding the 12 host stadiums. They'll spend millions more on souvenirs. And of course the Cup's winners will pay tax on the $576 million of prize money they earn for their skills.

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